DEPUTY PRIME MINISTER

Planning System

Keith Hill: The Government is continuing to take forward a major programme of reform to the planning system to support its drive to create sustainable communities, promote sustainable development and achieve a better balance of housing supply and demand. Our goal is positive planning to achieve these objectives. Our programme was launched in the planning Green Paper of December 2001 and the Government's policy statement on planning reform of July 2002 "Sustainable Communities—Delivering through Planning".
	The Barker and Egan reports have endorsed the Government's vision for a reformed planning system and the work we are doing to achieve this. We will be setting out how we intend to take forward the agenda of those two reports later in the summer.
	Local planning authority performance:
	We are making good progress towards the planning reform targets we have set. In particular, we have seen in the last six months the best improvement in a decade in the time which local authorities take to deal with planning applications. Since we published the planning Green Paper in December 2001, the proportions of local authorities achieving the targets for handling major commercial and residential applications has increased from 24 per cent. in January to March 2002 to 41 per cent. in January to March 2004. Handling performance on minor commercial and residential planning applications, as well as on other (mainly householder) applications have each doubled over this period. Furthermore, we have achieved our public service agreement target to halve the time it takes the Office of the Deputy Prime Minister to deal with called in cases and recovered appeals from close of inquiry to decision—in the quarter January—March 2004, 80 per cent. of the cases were dealt with in 16 weeks compared with 32 weeks.
	Planning and Compulsory Purchase Act
	The Planning and Compulsory Purchase Act received Royal Assent on 13 May. The Act puts in place a new statutory framework for regional planning and a reformed, more flexible local planning system which puts community involvement at the heart of the process.
	The Act sets a statutory objective for plans—to contribute to the achievement of sustainable development. It makes a number of reforms to development control to speed and improve the quality of decision making. Local development orders can be used to permit development that is acceptable at local level. There are new requirements for design and access statements to improve the design quality of new development; new processes for handling major infrastructure projects more effectively; requirements for statutory consultees to respond within a certain period; a shorter period of three years as the default for implementation of planning permission and consent; and simplified planning zones.
	We have removed crown immunity from planning controls and we will be consulting on the secondary legislation required to make the new arrangements work and we have made a number of reforms to the compulsory purchase order system.
	To support the Act we will be introducing new regulations and guidance in the summer and later in the year. This will include guidance on the new processes for regional and local planning and sustainability appraisal.
	We are working with our newly formed Ministerial stakeholder advisory group and others to take forward reforms to the planning obligations systems. I am announcing separately today our timetable for taking forward the reforms.
	Compulsory purchase reforms
	We are pushing ahead with proposals for reform of the compulsory purchase system. Besides the reforms in the Planning and Compulsory Purchase Act 2004, we have uprated the thresholds setting the levels of home loss compensation payable to owner-occupiers and tenants whose property is compulsorily acquired, and are committed to reviewing these thresholds annually. We are also currently reviewing the results of consultation on proposals to revise and update the Crichel Down rules governing the disposal of surplus land acquired under compulsory purchase powers and expect to issue a circular containing the revised rules in the summer. We have recently started consulting on proposals to revise the compulsory purchase order circular on how acquiring authorities can exercise their powers is in line with the new provisions in the 2004 Act, and on the secondary legislation to implement the compulsory purchase order provisions in the Act. The Law Commission published their final report on compensation in December 2003 and will be publishing their final report on procedures later in 2004.
	Planning policies
	I am today responding to the recommendation of the ODPM Select Committee about our programme of revising planning policy guidance. We will be focusing our efforts on the most important planning policies.
	Resourcing and supporting local planning authorities
	Our reform agenda covers more than legislation and policy change, however. We are making substantial additional resources available to local planning authorities to enable them to respond to the changes and to drive performance improvement. We have paid out the second tranche of the £350 million planning delivery grant which rewards performance by local planning authorities; £130 million was allocated for 2004–05 against criteria covering both plan making and development control.
	We have set performance standards for authorities with poor records of handling planning applications, of which there are 81 in 2004–05. We have introduced two new best value indicators that will allow comparison of the quality of planning services, replacing two existing indicators. The comprehensive performance assessment of district authorities is assessing strategies for balanced housing markets and public space. The assessments of unitary and county authorities are being brought up to date. Both sets of assessments provide a context in which to address performance improvement.
	We are providing practical help and advice to support improvement. We have announced that the planning advisory service, to be hosted by the Improvement Development Agency, will be open for business in the autumn. We are continuing to develop the planning portal and other e-planning initiatives. We are providing financial assistance to planning aid.
	Changing the culture of planning
	We are engaged in a programme for changing the culture of planning. We have put sustainable development at the heart of planning through the statutory objective in the Act and in PPS1. PPS1 emphasises that planning is a positive, proactive process. It sets out principles for community involvement in planning.
	As part of the skills agenda set out by the Egan report, we recently launched a new bursaries scheme to fund 144 awards for students who wish to undertake RTPI accredited one year post graduate planning courses and we will be working with stakeholders over the coming months on communicating the importance of planning, including new guides to the planning system for the general public and for business.
	We set out a road map at the end of 2001 for a reformed planning system. We have come a long way since then, as this statement shows. The Government remains committed to an efficient, effective transparent and accountable system which delivers sustainable development. We will continue to drive forward the reforms and culture change to make this happen.

Planning Obligations

Keith Hill: In the light of the report of the Barker review of housing supply, Delivering stability: Securing our future housing needs, published on 17 March, the Government has reviewed its plans for taking forward the reform of planning obligations foreshadowed in the consultation paper, Contributing to Sustainable Communities; a new approach to planning obligations, published in November 2003.
	The Government proposed in its November 2003 consultation paper a number of measures aimed at improving the current negotiating arrangements under s106 of the Town and Country Planning Act 1990 (amended by the 1991 Act), and a new optional planning charge. Sections 46 and 47 of the Planning and Compulsory Purchase Act 2004 provide powers to make regulations to implement changes to the planning obligations system.
	Separately, the Barker report recommended that the Government should introduce a planning-gain supplement (PGS) tied to the granting of planning permission so that part of landowner development gains could contribute to wider benefits for the community. It also recommended that, if the Government were minded to do this, planning obligations should be
	"scaled back to cover direct impacts and mitigation along with affordable and social housing requirements".
	The Government agreed that it was in principle acceptable to fund social housing and other measures out of the uplift in land values associated with the development process and the Chancellor of the Exchequer said in the Budget report of 17 March 2004 that he would consider proposals for a national PGS and make a decision by the end of 2005.
	Against this background the Government now proposes to take matters forward as follows.
	The Government will press ahead with identifying and implementing changes to the current arrangements for negotiated agreements. It will do this by revising the current circular 1/97 on planning obligations and publishing good practice guidance for local authorities and developers. The aim is to issue a draft revised circular for consultation in autumn 2004 with a view to putting the new arrangements in place early in 2005.
	The Government will continue to work up proposals in parallel for an optional planning charge, on a timetable consistent with that for decisions on the PGS. During this process, the Government will also encourage a number of local authorities to pilot options for charging by local authorities.
	In developing all these proposals we will work closely with our stakeholders, including my advisory group on planning obligations the membership of which is drawn from the major planning, housing, developer, voluntary sector and local authority interests.

Planning Policy Statements

Keith Hill: In its report on the Office of the Deputy Prime Minister's Annual Report 2003 the ODPM Select Committee gave consideration to the programme for replacing planning policy guidance notes, which set out national policies on issues such as planning for housing, transport etc., by more succinct planning policy statements. The Committee recommended (para 25):
	"The failure to deliver on commitments to reform the planning system by issuing revised guidance notes, has led to uncertainty and delays in planning decisions because of impending revisions to policies. We recommend that the Department redoubles its effort to complete the revision of national planning policy, and supporting good practice advice, where necessary, by July 2005. The ODPM would do well formally to withdraw its stated intention to revise the less controversial PPG notes."
	An interim response was included in the Government response to the Select Committee's report (Command 6141) published in February 2004. This listed the consultations on reviews of PPGs that were already in hand or planned but indicated that a further announcement would be made on other PPGs. A complete list of planning policy guidance notes is tabled below.
	The ODPM is concerned to complete the early updating and revision of policy in those PPGs where this is required for good policy reasons. It is equally concerned that the process of policy review should not cause undue disruption to the programme for local authorities to put in place the first round of new local development documents following commencement of the Planning and Compulsory Purchase Act, which received Royal Assent on 13 May 2004.
	The ODPM will therefore treat as a priority the review of the following PPGs: PPG1 (General Policies and Principles), PPG3 (Housing), PPG4 (Economic Development), PPG6 (Town Centres), PPG7 (Countryside), PPG9 (Nature Conservation/ Biodiversity), PPG10 (Planning and Waste Management), PPG11 (Regional Planning), PPG12 (Development Plans), PPG 22 (Renewable Energy), PPG 23 (Planning and Pollution) and PPG25 (Development and Flood Risk). Consultation has already taken place or is currently underway on several of these documents. The revision, or replacement as PPSs, of these PPGs will be completed by early 2005. Any further revisions to PPG3 (Housing) to take account of the recommendations of the Barker review of housing supply will be completed later in 2005.
	The review and replacement of other planning policy guidance notes will only take place as and when necessary in the light of their policy and strategic significance. In the meantime the current PPG will remain in place.
	
		PLANNING POLICY GUIDANCE NOTES
		
			  
		
		
			 1 General Policy and Principles 
			 2 Green Belts 
			 3 Housing 
			 4 Industrial and Commercial Development and Small Firms 
			 5 Simplified Planning Zones 
			 6 Town Centres and Retail Development 
			 7 The Countryside—Environmental Quality and Economic and Social Development 
			 8 Telecommunications 
			 9 Nature Conservation/Biodiversity 
			 10 Planning and Waste Management 
			 11 Regional Planning 
			 12 Development Plans 
			 13 Transport 
			 14 Development on Unstable Land 
			 15 Planning and the Historic Environment 
			 16 Archaeology and Planning 
			 17 Planning for Open Space, Sport and Recreation 
			 18 Enforcing Planning Control 
			 19 Outdoor Advertisement Control 
			 20 Coastal Planning 
			 21 Tourism 
			 22 Renewable Energy 
			 23 Planning and Pollution 
			 24 Planning and Noise 
			 25 Planning and Flood Risk

Planning and Compulsory Purchase Act

Keith Hill: The Planning and Compulsory Purchase Act received Royal Assent on 13 May. The Government intends to bring the provisions of the Act into force over the coming months through a series of commencement orders. It is the convention that no part of an Act should be brought into effect earlier than two months after Royal Assent other than in exceptional circumstances.
	The Act contains a number of powers enabling the Secretary of State to make subordinate legislation such as regulations or orders. The first commencement order will bring the enabling powers to make subordinate legislation into effect, and it is intended that this order will be made in the second half of July. Subordinate legislation will then be made. Our general approach is to bring substantive provisions of the Act relating to England into force by further commencement orders, which will take effect at the same time as the relevant regulations or orders.
	The following table sets out an indicative timetable for these commencement orders:
	
		
			 Provisions Commencement Date 
		
		
			 Regional Planning (Part 1) September 2004 (together with associated regulations and PPS 11) 
			 Local Planning (Part 2) September 2004 (together with associated regulations and PPS 12) 
			 Development Planand Sustainable Development (Part 3) September 2004 
			 Development Control (Part 4) A number of these provisions are dependent on new regulations or changes to the General Development Procedure Order. Where that is the case and the draft regulations or GDPO changes have already been subject to consultation, provisions are expected to be brought into effect in September 2004. Where the regulations or GDPO changes have not yet been subject to consultation, that will take place in the autumn and the provisions are expected to come into effect in early 2005. Regulations on planning obligations will not be made until early 2006. 
			 Slip Rule September 2004 
			 Crown Immunity (Part 7, Chapter 1) End 2005 
			 Compulsory Purchase (Part 8) End October 2004 
		
	
	The National Assembly for Wales is responsible for the commencement order for part 6 of the Act.
	Scottish Ministers are responsible for the commencement order for chapter 2 of part 7.
	The provisions in part 9 (Miscellaneous) and the schedules will be brought into effect on the same date as the substantive provisions to which they relate.

English Indices of Deprivation 2004

Yvette Cooper: Today I am publishing revised tables for the Indices of Deprivation 2004. The index is based on a total of 37 indicators and the tables published on 28 April contained errors.
	IMD 2004 is a major improvement on previous deprivation indices, introducing two new domains—crime and living environment—and a very significant new small area geography—super output areas. It makes available a much better evidence base to improve policy making and delivery at all levels. But these improvements make it a much more complex index to produce. Despite a long and very detailed period of consultation, and extensive pre-publication checks, there have been some teething troubles. I very much regret that these errors have occurred.
	The errors occurred in creating the two new domains in the index—living environment and crime. In the former, one set of data was input in the wrong rank order. In the latter, there was a technical error in the way in which the data were smoothed to deal with inaccuracies introduced by small numbers of particular crimes.
	These errors have now been corrected, and very extensive checks have been made both by the contractors, and at the request of Ministers by independent experts, to ensure as far as possible there are no further such errors in the index. I have placed revised tables in the Library.
	The revised tables show changes in the rankings both of individual local authorities, and of the new small super output areas. The most significant of these is that Ashfield has moved out of the list of authorities which are in the top 50 on at least one of the district level measures in the index, while Hammersmith and Fulham rejoins that list.
	The new tables are also being placed being on the Department's website.

TRADE AND INDUSTRY

British Energy plc (State Aids)

Patricia Hewitt: The Government were expecting to receive a decision from the European Commission in summer 2004 on the Government's proposed restructuring aid to British Energy plc. Receipt of a positive decision is a condition of the proposed restructuring of the company.
	Due to the need to complete final assessments in relation to the financing of the company post-restructuring, it will now not be possible for the Government to present all the necessary information to the commission in time to enable the commission to take a decision before its summer break. Consequently, I now expect the commission to take a decision in autumn 2004.
	British Energy continues to make progress on its restructuring, which remains subject to a number of significant uncertainties and important conditions. As I have said previously, the Government's contingency plans to fund the administration of the company should any of the restructuring conditions not be met or the restructuring fail for any other reason will, therefore, remain in place.

Estate Agents

Gerry Sutcliffe: I aimed to publish the Government's response to the Office of Fair Trading report on the estate agency market in England and Wales by 18 June, but we have received a number of recent representations on the report that we are still considering. I expect the response to be published shortly.

Chemical Weapons Act

Nigel Griffiths: I am pleased to announce that in accordance with the requirements of the Chemical Weapons Act 1996, I have today laid a report before the House on its operation during 2003.

WORK AND PENSIONS

New Deal

Andrew Smith: I have today published a paper "Building on New Deal: Local solutions meeting individual needs" which provides details of our strategy for building on the success of our employment programmes. A copy has been placed in the Library and copies are available for hon. Members from the Vote Office. This follows the publication of our preliminary paper on the 19 May.
	The UK employment rate is now the highest in the G7, and the unemployment rate the lowest. Employment has risen in every region of the UK, and risen more in areas that previously had the lowest employment rates. The number of unemployed people has fallen by over 600,000 on both measures since 1997 to its lowest level for over a quarter of a century.
	This success reflects a comprehensive economic strategy that the Government has put into place since 1997. At the heart of this success has been our welfare to work policies such as the new deal programmes, which have helped well over a million people to find work.
	We have achieved significant falls in unemployment and rises in the employment levels of lone parents and older workers. But we are determined to do even more for those who face the most difficult barriers to work. We will build upon the success of the new deal, strengthening its ability to help people who face particular difficulties in moving into employment. This requires a personalised approach where personal advisers and local managers are given sufficient flexibility to deliver solutions appropriate for individuals and local labour markets. This strategy builds on existing policies to secure social justice for those who too often have been left behind, and to enable them to realise their full potential, to the economic and social benefit of the whole community and to achieve the goal of full employment in every region and nation of the UK.
	We will be working with the devolved administrations, our private and voluntary sector partners and other organisations to successfully deliver this new approach and help even more people to move from benefit dependency into work.

DEFENCE

Iraq: UK Forces in Multinational Division (South-East)

Geoff Hoon: As part of the routine management of UK forces in the Multinational Division (South-East) (MND(SE)) in Iraq, we intend to conduct a further roulement over the coming months. The lead UK formation, currently 1 Mechanised Brigade, will be provided by 4 Armoured Brigade from October 2004. In addition to 4 Armoured Brigade's Headquarters and Signals squadron, we plan to replace the major units currently in Iraq as follows:
	
		
			 Unit deploying Unit currently in theatre 
		
		
			 4 Armoured Brigade Headquarters and Signal Squadron 1 Mechanised Brigade Headquarters and Signal Squadron 
			 1st the Queen's Dragoon Guards The Household Cavalry Regiment 
			 The Royal Dragoon Guards The Queens Royal Lancers 
			 4th Regiment the Royal Artillery 1st Regiment Royal Horse Artillery 
			 1st Battalion the Scots Guards 1st Battalion the Princess of Wales' Royal Regiment 
			 1st Battalion the Welsh Guards 1st Battalion the Royal Welch Fusiliers 
			 1st Battalion the Duke of Wellington's Regiment 1st Battalion the Cheshire Regiment 
			 21 Engineer Regiment 22 Engineer Regiment 
		
	
	This process of roulement is currently planned to take place over the period from mid-October to mid-November. We expect that 4 Armoured Brigade Headquarters will assume authority in early November. We expect that the number of armed forces personnel in theatre will remain broadly stable as a result of these changes.
	In my statement on 27 May 2004, Official Report, column 1725, I announced that we were reducing the notice to move of 40 Commando the Royal Marines, in case it proved necessary to deploy it to help continue the work currently carried out by the two surge battalions, the 1st Battalion the Argyll and Sutherland Highlanders and the 1st Battalion the Royal Highland Fusiliers. These battalions have carried out much impressive work, particularly in developing Iraqi security forces. However, the General Officer Commanding has concluded that there will be a continuing requirement for some surge capability in MND(SE), both to provide support to Iraqi security forces in the early stages of the transitional period, and to provide capacity for some other tasks, including the protection of essential infrastructure over the summer period.
	As I announced in that statement, the Argyll and Sutherland Highlanders will complete their six-month tour in July. Three companies of the Royal Highland Fusiliers were originally deployed for a three-month tour to mid-July (the other company forms the Falkland Island Roulement Infantry Company). We have concluded that we should not extend their tour in Iraq any further. On the advice of the General Officer Commanding, therefore, I have decided that 40 Commando should deploy to replace the Royal Highland Fusiliers. Because all four companies of 40 Commando will deploy to Iraq there will be a net increase of approximately 270 personnel in theatre, which will bring the total to around 9,200. We envisage that deployment will begin on 21 June in order to complete the handover in mid-July.
	As part of the roulement from 1 Mechanised Brigade to 4 Armoured Brigade, and in line with our policy of employing the reserves as an integral component of the armed forces, we shall shortly begin mobilising a further tranche of approximately 750 reservists to support operations in Iraq, with a view to deployment from mid- October onwards. This is a smaller deployment than previously required for Op TELIC. We currently have some 1,400 Army reservists carrying out a range of activities including medical support, force protection duties and providing individual reinforcements to units. We anticipate that most of these tasks will continue but the reduction in the number of individual reinforcements required and the replacement of the Reserve Field Hospital with one staffed by Regular soldiers will reduce the total Reserve requirement. These changes mean that the number of Army reservists in theatre will drop to about 1,050 at the start of the roulement (about 13 percent of the land component) and then further reduce to about 750 over the following months.
	We aim to issue the call-out notices in two tranches on 23 July and 27 August and begin deployment in mid-October. Reservist personnel will receive at least 21 days' notice. Mobilisation will be followed by a period of individual, pre-deployment and collective training, integration into receiving units, and then a short period of pre-deployment leave. The majority of those called-out can expect a deployed tour of six months and a total period of mobilisation, including post-tour leave, of about nine months, though for a few it may be longer.
	Between now and 23 July we aim to identify for selection as accurately as possible those reservists who are believed to be fit and available for deployment. As is customary, to ensure that we successfully mobilise the required number, we will need to issue a greater number of call-out notices than the actual requirement.
	I would emphasise that these are routine adjustments to UK forces in MND(SE). We continue to consider, with our partners in the multinational force, the levels and dispositions of forces required in Iraq in the months ahead, to support the sovereign Interim Government of Iraq through the process leading to the election of a transitional assembly and Government early in 2005. If we judge that further changes to the UK military contribution in Iraq would be appropriate to support this process, we will of course inform the House at the earliest opportunity. At present, however, no such decision has been made.

Northern Ireland

Adam Ingram: As part of our normal process of keeping force levels under review, the General Officer Commandry Northern Ireland, in consultation with the Chief Constable of the PSNI, has concluded that two of his units (not routinely based in Northern Ireland) can be removed from his command as they are not required for routine support to the police in Northern Ireland. Accordingly, two battalions which have been rear-based outside Northern Ireland since December 2003 and February 2004, will transfer to the command of CinC LAND on 16 July 2004.
	This is a prudent measure based on the GOC's and Chief Constable's assessment of the current security situation and the success of the PSNI in dealing with the threat from terrorism with reduced military support. It does not affect the Army's ability to support the PSNI in countering the threat from terrorism and preventing potential public disorder. We will continue to keep force levels in Northern Ireland under regular review to best deliver the support required by the PSNI.

EDUCATION AND SKILLS

Medical Expert Witnesses

Margaret Hodge: I am making this statement with my hon. Friend the Parliamentary Under-Secretary of State for Health my right hon. Friend the Member for South Thanet (Dr. Ladyman).
	Widespread concern has been expressed about the quality and validity of evidence given by medical expert witnesses following the recent appeals against convictions of mothers alleged to have been responsible for killing their children.
	Medical evidence from expert witnesses plays an important part in court proceedings. Proceedings in the criminal and family courts are different from one another and do not follow the same processes. Requirements differ between them in relation to standards of proof, rules of evidence and admissibility of material. In criminal procedures, the competency of witnesses and the evidence of the prosecution can be challenged. The prosecution has to establish facts beyond reasonable doubt. In civil proceedings, evidence is assessed against a threshold of proof that is based on the balance of probabilities, though there too the input of expert witnesses may be tested by the parties to a case and by the court, before judicial determinations are made.
	The concerns surrounding the reliability of expert witnesses are both complex and substantial and are worsening the already acute problem which the family courts are experiencing in finding experts of high standing to give medical evidence in proceedings, particularly where child abuse is suspected. Nonetheless, these issues of concern go beyond child protection or children's cases and involve the scientific basis for medical evidence given both in criminal and civil courts, and extend to other areas, such as forensic pathology.
	We have already taken a number of steps. I have, as indicated in my statement of 23 February 2004, issued guidance to local authorities in Local Authority Circular I (2004)5, asking that they review the cases of children who are the subject of current care proceedings or where local authorities are exercising responsibility for children who are currently the subject of care and related orders. The results of an initial survey have today been placed in the Library. The survey was carried out by the Association of Directors of Social Services, and asked questions relating to the first stage review we asked local authorities to undertake. This first stage review covered all of the cases of children who are the subject of current care proceedings. This stage did not cover children who were already the subject of a care or related order. These cases will be reviewed as a second stage review and a more comprehensive picture will be obtained once this second stage has been completed.
	Of the 150 local authorities with social services responsibilities, 130 have responded to the survey. The 130 local authorities reported that the number of cases in which disputed expert medical evidence features, or is anticipated to feature, is relatively small, arising in only 47 out of the 5,175 cases. There were a total of nine cases where the impact of this evidence on the live proceedings is already known. In one of these cases there has been a change in the local authority's care plan. In a further 38 cases, the proceedings are not yet sufficiently advanced for it yet to be clear whether the disputed medical evidence will result in a change to the care plan. The further survey of the second stage review, which is now being commissioned, will ascertain the extent to which the review of existing orders, perhaps 30,000 in number, has led to changes in current care plans. The results of this second survey will also be placed in the Library.
	Nonetheless, the results of this initial survey should not give rise to complacency that the interests of children and their families are being optimally served. We are, therefore, also announcing today a programme of work to determine how best to ensure the availability and quality of medical expert resources to the family courts. Sir Liam Donaldson, the Government's Chief Medical Officer (CMO), will lead this work and plans to involve a wide range of interests, including judicial, I legal, clinical specialities, scientific, statistical and consumer interests, as well as health regulatory bodies. The CMO will determine how this work will be taken forward.
	I also wish to take this opportunity to highlight the publication, on 14 May 2004, of the judgment of the Court of Appeal in the family cases of Re LB and Re LU. This important judgment sets out clearly the ways in which the judgment in the case of Angela Cannings impacts on the family jurisdiction. I will be writing to local authorities, in order to draw their attention to this new judgment and to the action taken by the GMC in relation to Dr Colin Paterson's past performance as an expert medical witness in certain family cases.

TREASURY

Financial Services

Ruth Kelly: In July 2002, Ron Sandler published his report into the medium and long-term savings industry in the UK. He found that the savings market was daunting for the consumer, that the industry's products were complex and opaque and that there were weak competitive pressures on providers of financial products. He identified a number of formidable challenges for the Government, the regulator and for the industry. He recommended the introduction of a suite of simple regulated products—with capped charges, investment risk controls and no exit penalties—to build on the existing stakeholder pension and CAT-mark regime and to entrench competition in the market, stripping out substantial elements of cost.
	I can today announce some important steps forward which will offer a robust basis for the future of the savings industry—one in which effective competitive forces can be made to work for the benefit of consumers, the wider economy and, ultimately, the industry itself.
	First, in response to Ron Sandler's recommendations, the FSA has successfully market-tested a new basic advice regime for stakeholder products. This would reduce the time taken for a typical pension sale from several hours to approximately 30–40 minutes. In the future, employees would be able to buy a pension or other stakeholder product in their lunch hour.
	The FSA has today launched its consultation on the details of the new basic advice regime. The regime reflects the simpler, risk-controlled nature of stakeholder products while maintaining consumer protection.
	Secondly, I can today announce that the charges on the new stakeholder regime will be excellent value for consumers, while allowing lower-income consumers greater access to financial products.
	The Government have always maintained that the price cap for stakeholder products should reflect the economics of the stakeholder market.
	Therefore, in 2003, the Treasury and the Department for Work and Pensions commissioned research by Deloitte on the market impact of a range of price caps to inform the Government's decision on the price cap. This research is being published today. We have also consulted widely with consumer groups and industry.
	For the deposit account product, the Government have decided that the interest rate earned should be no lower than 1 per cent. below the Bank of England base rate. This product will replace the cash ISA for which the price cap was set at 2 per cent. below the base rate and therefore represents even better value for money for consumers.
	For the medium-term product, the Government have decided to set the cap at an annual management charge of 1.5 per cent. for the first 10 years that the product is held and 1.0 per cent. thereafter. This will provide excellent value for money for consumers while giving providers satisfactory returns and the scope for price competition under the cap.
	In the pension market, the stakeholder pension has already had a huge impact. Nearly 2 million stakeholder pensions have been sold and charges have been driven down right across the industry. When the price cap was set in 2000 it allowed for advice to be charged for separately. However, the market has not evolved as expected, with very few firms separately charging for advice. The result has been that the industry has been reluctant to sell their products to lower-income consumers. We have listened to representations from consumer groups and from the industry. The Government have therefore decided to raise the cap on the annual management charge for the stakeholder pension product to 1.5 per cent. for the first 10 years that the product is held and 1.0 per cent. thereafter, matching the cap set for the new medium-term product and encouraging long-term saving. This will allow the cost of basic advice to be incorporated under the cap, whilst maintaining excellent value for customers.
	The Government would expect there to be significant price competition under these caps and in particular prices to be lower than 1 per cent. for substantial numbers of stakeholder products sold, for example, without advice or to group schemes. We intend to review the new caps in three years to assess their impact on competition in the market.
	We realise that, for less efficient providers these charge caps represent a challenge. But it is only right that firms are challenged so that our objectives of good deals for consumers and increasing efficiency are met. But for those firms that can exploit innovative and efficient ways of distributing stakeholder products, these charge caps represent an excellent opportunity for profitable growth and so I hope that they will be welcomed by the financial services industry.
	The Treasury consultation document is available in the Vote Office and the Library of the House.

HOME DEPARTMENT

European Community Association Agreements Applications

David Blunkett: On 30 March, I asked Ken Sutton, Senior Director (Asylum) in the Immigration and Nationality Directorate (IND), to investigate allegations about how applications under the European Communities Association Agreements (ECAA) from citizens of Romania and Bulgaria to come to the United Kingdom to establish businesses or set up in self-employment had been dealt with. The central allegation was of a massive, well-organised scam in relation to these applications and that whilst this had been drawn to the attention of the Home Office nothing had been done to address the problem.
	These were serious allegations and to get to the facts quickly in order to set matters right, I asked Mr. Sutton to investigate them. I am grateful to him for the thoroughness of his work. Mr. Sutton makes 15 recommendations all of which I accept and which I am today publishing with his report in full.
	The ECAAs, which were signed from 1994 onwards, give rights of establishment in EU member states to those from accession countries seeking to set up in business or self-employment. Such people are to be treated no less favourably than nationals of the host state. The thinking behind the agreements is that, in advance of accession, citizens of countries joining the European Union should have some of the advantages of membership. People who establish themselves here in business or in self-employment bring real benefits to our economy and to their own countries as they prepare for membership of the EU.
	Responsibility for granting entry into the UK under the scheme came to be shared between staff in the IND—first in Croydon and later in Sheffield—and staff in posts overseas. The issue at the centre of these allegations is that IND staff granted applications under the ECAA on the basis of pro forma business plans and forged documentation and ignored repeated attempts by entry clearance staff in post in Bucharest and Sofia to challenge this practice. It was also alleged that the underlying reason for this practice was to reduce the number of asylum applications in the UK.
	Mr. Sutton confirms that there is clear evidence that the ECAA category has been exploited and that applications were granted to some individuals who were unlikely to have been able to demonstrate that they could sustain themselves in business. However, because of the staged nature of the process, final, indefinite leave to remain in the UK had only been granted to around 150 applicants in the last two years by the time of the suspension of the scheme in March. Others who came to the UK in this way have not yet reached that status and the actions that Mr. Sutton recommends and that I have instructed the IND to put in place, mean that only those who meet the full requirements of the scheme will be allowed to stay permanently in this country. He also suggests that the real purpose of those coming to the UK in this way was likely to be simply to seek employment rather than to exploit the welfare state for provision of benefits to which they were not entitled.
	In turning to how this situation has arisen, Mr. Sutton's report concludes that the central allegation that the Home Office was made aware of a scam and took no steps to address it is wrong. But it does paint a picture of an insufficiently robust approach to the way in which this scheme functioned operationally and a failure of related management systems. The report finds that there was a sharp difference of view between, on the one hand, staff responsible for policy and casework on ECAA applications in IND who thought there was little room in law for manoeuvre in refusing applications and, on the other, staff in Bucharest and Sofia responsible for considering entry clearance applications in such cases, who favoured a much tougher approach. Mr. Sutton concludes that neither approach was entirely right but that a more robust approach could and should be adopted.
	The reason for this problem stems back to 1996, when the practice followed in dealing with applications made at ports of entry under the ECAAs was challenged in the courts. In the judgments of the European Court of Justice which followed in September 2001 the Court emphasised that Member States were prohibited from discriminating against these nationals setting up in business or self-employment. Staff in the IND took from this, from the terms of the agreements themselves, and from the fact that there are few restrictions on British citizens establishing business or setting up as self-employed people, that there were only limited grounds for refusing applicants under the ECAA especially in low skilled routes. The view in the IND was so entrenched that the warnings from entry clearance staff and the increase in numbers in the scheme did not lead to a reconsideration of the correct interpretation of our obligations under the ECAA. As a result, no analysis of alternative approaches was considered by senior managers or put to Ministers including when my right hon. Friend the Member for Stretford and Urmston (Beverley Hughes) requested advice following receipt of a letter last year from my hon. Friend the Member for Coventry North-East (Mr. Ainsworth). The fact that an aspect of the Government's approach to ECAA cases had previously been challenged on applicants' behalf in the European Court of Justice highlights the difficulties of striking the right balance in this area.
	On the other hand, entry clearance staff in Bucharest and Sofia, faced with a significant increase in the number of applications and the growth of advisers whose services included the provision of standard format business plans, favoured a different approach under which most cases would have been refused. This difference of view was the subject of exchanges between staff in the posts and the Home Office over a period, but the Home Office view prevailed because this was believed to be a necessary consequence of the terms of the agreements and the relevant ECJ judgments.
	While the requirements for a successful application are not high, particularly in a low-skilled trade, legal advice that Mr. Sutton has taken in the course of his investigation would support a more challenging approach to decision making in these cases than the Home Office has taken in the past. Under this approach, factors such as those identified by the posts as grounds for refusal could be taken into account in deciding, in the round, whether the application is credible, although none of these factors on its own would support a legally sustainable refusal without looking at the overall strength of the application.
	Mr. Sutton has recommended that in future decisions on applications for entry clearance in this category should be taken at the post by entry clearance officers and that new guidance should be drawn up reflecting the legal advice he has taken. I have accepted these recommendations, and a team comprising Home Office, UK visas and FCO staff will shortly visit Bucharest and Sofia to establish the new approach. Once this guidance is in place, I intend, with my right hon. Friend the Foreign Secretary, to restore the service to those seeking entry clearance under the ECAAs at the posts at Bucharest and Sofia. Genuine applicants under the agreements who establish themselves here in business or as self-employed people will continue to be welcome this country, and will not be discouraged.
	In addition, I have reinforced with managers my existing directive that all significant legal judgments should be drawn to my attention with a view to considering both their implications and the potential for further challenge.
	Allegations were also made about the use of fraudulent documents in applications. Mr. Sutton's investigation has found that the IND did take an appropriately serious view of cases where there were grounds for suspecting that passports or other travel documents were forged. The report also finds that confirmation of the fact that some bank statements were forged emerged only following the posting of an immigration liaison officer to Bucharest in December last year and that action was taken on this between then and the allegations made in March. This is important given the charge that IND staff were agreeing applications that they knew to be supported by forged documentation. However, there are still grounds for concern in relation to employment records that were not adequately dealt with because they were not believed to be sufficient grounds for refusal of an application. He therefore recommends that the new guidance should make it clear that the authenticity of all supporting documents is relevant to the decision in the round on the credibility of the application.
	I have already indicated that only 150 applicants were able to proceed to indefinite leave to remain in the UK as a result of the scheme. However, the number of individuals gaining initial entry into the UK using this route or switching into it from other categories was substantial. Mr. Sutton identifies a total of ECAA applications from Romanian and Bulgarian citizens over the relevant period as being just under 7,400 in 2002–03 and nearly 16,600 in 2003–04. Twenty five per cent. of applications to switch into the category from people already in the UK were from Romanian and Bulgarian nationals. I have already announced a series of measures to tighten the arrangements for those coming to work in the UK that the recommendations in this report will strengthen still further.
	Many of these will be applications that would have been granted in any case, but it is likely that some involved people who intended to work without necessarily setting up in business or being self-employed. Mr. Sutton's report also indicates that it is likely that most of those successful under the scheme worked and in consequence did not come to make demands on the benefits system. None the less, we will now ensure that other than those few who have been granted ILR, all of those already in the UK under the ECAA for a limited period are fully tested before they are given indefinite leave to remain or are permitted further extensions short of that. We shall therefore strengthen our approach to decisions not only at entry clearance stage, but also at later stages, and will be looking to test rigorously whether businesses on which earlier successful applications were based have in fact been established and are viable. I have therefore also accepted Mr. Sutton's recommendation that the relevant immigration rules should be rewritten, and in particular that where the applicant is already in this country and is seeking to switch into the ECAA category, the test should be significantly tightened. The approach should mirror the case of ECAA applicants who arrive at ports without entry clearance. The IND should only grant such applications if the applicant "clearly and manifestly" meets the relevant test for the ECAA category. This should be seen as a significant test and one that the majority of applicants might fail. This will include the allocation of enforcement staff to carry out checks on those already in the system and, if appropriate, to remove them from the UK.
	The rewritten immigration rules will also include clearer requirements ensuring that applicants have sufficient funds to be able to support themselves financially while in the UK without having to resort to another job or seeking state benefits.
	However, whilst operational practice in relation to these applications was clearly inadequate, the report finds that action was taken to respond to the exploitation of the ECAA route in Romania and Bulgaria in particular in relation to links to organised crime. Mr. Sutton's report finds that, over two years ago, intelligence-led operations and, in particular under Reflex Romania, were mounted against organised immigration crime which had an impact on investigating organised exploitation of the ECAA category. Under this programme resources have been provided to develop a central intelligence unit in Romania with seconded staff as well as specialist training and equipment. Overall—covering immigration crime as a whole—this unit has already disrupted 40 operations and arrested nearly 100 people since it started about 18 months ago.
	These operations continue, and have already led to arrests. Since details cannot be published, Mr. Sutton has recommended that Opposition spokesmen be offered a confidential briefing on the operations that I have now made available. He has also recommended that we should build on the equivalent programme in Bulgaria on which work began three months ago.
	Mr. Sutton has also reported on the posting last year of an immigration liaison officer (ILO) to Bucharest whose work has been instrumental in crystallising understanding of the recent problems, and who has gone on to prompt action against those representatives whose activities have stepped beyond legitimate help for applicants. I welcome this positive development. This was followed up by visits from senior officials in March this year.
	I also touched on these operations in my own speech to the House on 30 March when I referred to the visit by officials earlier that month. This visit was for discussions with the Romanians on combating illegal immigration, including the Reflex work. Abuse of the ECAA route came up at briefing meetings that my senior official had with embassy staff. The report I received from him on 4 March on his visit referred to concerns that the ECAA scheme was vulnerable to abuse, that a solicitor had been arrested on suspicion of facilitation in connection with this, and that he was following this up. In the course of his inquiry, Mr. Sutton has now found that in fact James Cameron had a more detailed informal conversation, not with my senior official, but with other members of his team, which was not reported to me at the time or to my right hon. Friend the then Minister of State.
	Mr. Sutton also examined the allegation that the IND approach was motivated by a desire to reduce the numbers of those claiming asylum from the two countries in order to meet the Prime Minister's target to halve the number of asylum applications. He concludes that the Home Office approach was motivated by a genuinely held view that the law required cases to be decided in a particular way, and not, as has been alleged, by the drive to reduce the level of asylum applications. In reality the number of asylum applications from citizens of all East European countries fell during the relevant period which was as a result of our introduction of non-suspensive appeals in clearly unfounded cases. The decrease in applications continued following the introduction of non-suspensive appeals in November 2002 and March 2003. This is consistent with the findings of the recent review of asylum statistics by the National Audit Office [HC 625 Session 2003–04] which concluded that
	"there is no clear statistical evidence that the reduction in the number of asylum applications has had any significant impact on other forms of migration".
	The supporting analysis for the NAO report, undertaken by a team from University College, London concluded that:
	"There is little likelihood of a link between the increase in entrants under the ECAA Arrangements and the fall in the number of asylum applicants over the period".
	To sum up, Mr. Sutton's report describes a significant, and until now unresolved, failure in handling ECAA applications over the last two years. As a result, around 150 applicants under the ECAA scheme—some of whom may not have been successful under the process I am putting in place—have been granted indefinite leave to remain. But it does not find that allegations about wholesale exploitation of a process by organised criminals were ignored—on the contrary arrests had already taken place when the allegations were made—nor that applications were simply waved through in order to meet an asylum target. This has not led to the wholesale undermining of our balanced immigration and asylum policy. Those who came here to work have done so and contributed to our economy.
	Nonetheless this report exposes failings that I am determined—with senior management—to set right. Over the last two years, my right hon. Friend the member for Stretford and Urmston oversaw a major programme of change including establishing a programme board structure and the restructuring of management systems and management information. Closer links have been established between operations and policy and with UK visas and posts abroad. UK visas are now, for example, represented at senior level on the Joint Programme Board of officials which oversees the Home Office/Department of Constitutional Affairs Immigration and Asylum Delivery Plan. These changes have already shown results in relation to asylum. Building on that success and the more recent establishment of task-forces on students, marriage, migration for work (including under the ECAAs) and the Commonwealth working holidaymaker scheme which brings together policy, operational and intelligence personnel, IND now has a stronger capacity to identify significant trends in applications, spot emerging problems and mobilise policy and operational resources to address them, as should have happened in this case and which is a prerequisite to ensure that Ministers and senior managers are abreast of all important developments.
	In addition, the IND has developed its internal arrangements for management of intelligence. A new tactical and tasking coordination group has recently been established and the national intelligence model has been adopted. The group is responsible for considering risks, deciding priorities and resourcing issues, arising from an assessment of areas of immigration control that might be open to abuse. There is also a new form of reporting to Ministers that covers risks and counter measures including operations. These mechanisms mean that in future, the organisation will be more effective in spotting trends and tackling problems.
	Mr. Sutton's report makes a number of other recommendations, all of which I have accepted. Ministers and senior management alike are determined to ensure that real improvements are made as a result of the report we are publishing today.